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Brent rises to highest since 2018 on global energy crunch

The global benchmark crude surged 1.8% on Monday, but met some resistance as it neared the key, psychological $80-a-barrel level.
Image: Daniel Acker/Bloomberg

Brent closed at the highest in nearly three years amid signs the crude market is rapidly tightening from a global energy crunch.

The global benchmark crude surged 1.8% on Monday, but met some resistance as it neared the key, psychological $80-a-barrel level. Its US counterpart rose 2% to close above $75 a barrel for the first time since July. Both benchmarks are set to continue climbing as supply struggles to catch up with fast-rising demand, according to Trafigura Group’s co-head of oil trading Ben Luckock. His remarks came as Goldman Sachs Group Inc. said Brent could hit $90 by year-end as the market is in a bigger deficit than many realise.

Brent failed to break $80 because some speculators were taking profits, said Bob Yawger, director of the futures division at Mizuho Securities. “We should look for the market to reload and give the $80 level another shot in coming days.”

Crude is rallying on signs that inventories globally are falling sharply, with demand heating up ahead of winter and OPEC+ only slowly adding barrels back to the market. As traders eye the prospect of large market deficits, Trafigura said longer-dated oil prices remain cheap at around $70 a barrel. So-called timespreads, which gauge market strength, have rallied sharply in recent weeks in another sign that traders are positive about the outlook.

“Observable inventory draws are the largest on record,” Goldman Sachs analysts including Damien Courvalin wrote in a note to clients. “This deficit will not be reversed in coming months, in our view, as its scale will overwhelm both the willingness and ability of OPEC+ to ramp up.”

Prices:
  • West Texas Intermediate for November delivery advanced $1.47 to settle at $75.45 a barrel in New York.
  • Brent for November settlement climbed $1.44 to settle at $79.53 a barrel

WTI’s front-month contract traded at the biggest premium to its second-month in nearly two months.

Meanwhile, OPEC+ is scheduled to meet on October 4. to review its output policy. Internal documents from the group have already highlighted the risk of the natural gas crisis ramping up demand. World oil consumption could be boosted by an additional 370 000 barrels a day — roughly 6% of expected growth — if gas prices stay high for an extended period, according to the group.

US natural gas futures rose for a third straight session on Monday as inventory levels stayed low ahead of the heating season.

© 2021 Bloomberg

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There is an absolute fuel and energy crises of note looming in SA
The proposed changes to fuel quality will drastically reduce local refining and the lack of suitable high capacity offloading ports to plug the gap will not be filled by 2023.
The rapidly escalating international fuel prices and sliding exchange rates will further escalate the problem.
Government will obviously ingnore the problem until it is clear to all that it can no longer be denied and thn have lots of “plans” incapable of fixing the problems they causes in the first instance.

Indeed… but the fuel refining story has been around for at least 10 years. No-one wanted to pick up the tab to upgrade refining capabilities and the can was duly kicked down the road. Now the chickens are coming home to roost. Never any urgency in this country to get things done!

Making haste is not in their DNA only making waste is.

End of comments.

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